As combatting climate change and transforming toward sustainability are urgent matters, the UN formed the Net-Zero Banking Alliance (NZBA) as a part of a global campaign, “Race to Zero.” The NZBA is a network of banks representing roughly 40% of global banking assets committed to achieving net-zero emissions in their lending and investment portfolios by 2050, leading the banks to take actions that align with their goals.
BANKS AS PARTIES IN POSITION OF INFLUENCE
Mark Carney, governor of the Bank of England, points out that especially climate change is a huge concern for the financial industry. Banks play a vital and central position in society as the main factor in controlling the money market and assets, underwriting corporate stock and bond offerings, and managing investment portfolios. They are, therefore, greatly responsible for promoting sustainable growth. With this being said, banks have to take action in reinforcing society to compete for climate change as they can contribute to impact transformative behavior.
THE NZBA’S FOUR PILLARS TO ACHIEVE THE COMMITMENT
This alliance is the primary driver in being the tools that help guide parties in positions of influence to combat climate change—its primary catalyst for achieving the net-zero transition is the target setting and reporting process embedded within its central Commitment Statement. The NZBA encourages climate initiatives under the Principles for Responsible Banking to accelerate science-based climate target setting and develop common practices. The guidelines outline four principles for target-setting, including establishing an emissions baseline, annually measuring and reporting the emissions profile of their lending portfolios and investment activities, using widely accepted science-based decarbonization scenarios to set both long-term and intermediate targets that are in line with the temperature goals of the Paris Agreement, and reviewing targets to ensure they are still in line with the objectives.
The NZBA illustrates bringing together the key players in one industry and providing them with a specific goal and direction to inspire ambition among its participants. Many banks still need to create explicit strategies and goals to align their policy with the Paris Agreement, as evidenced by the absence of many banks from the list. As banks are in a position of influence, it is essential to establish the objective, reveal their actions, and keep track of progress. The financial and public sectors, therefore, must support this kind of collaboration to achieve society’s sustainability goal.
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